SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 15406 / July 7, 1997
UNITED STATES v. BARRY L. KING (United States District Court for the
District of Massachusetts C.A. No. 95-10220NMG)
The Securities and Exchange Commission ("Commission") announced that,
on July 1, 1997, Barry L. King ("King"), formerly of Wellesley,
Massachusetts and presently residing in Boca Raton, Florida, was sentenced
by the Hon. Nathaniel M. Gorton, United States District Court for the
District of Massachusetts, to serve a term of 46 months in federal prison,
followed by a three-year term of supervised release. In addition, Judge
Gorton ordered King to pay restitution of $8,724,656 to defrauded
investors, representing their losses as a result of a fraudulent mortgage
pooling scheme. King was prohibited from incurring new credit charges or
opening new lines of credit unless he is current in making restitution
payments pursuant to a schedule to be determined by the U.S. Probation
Office. King was also barred from seeking employment in a financial
position that would incur third-party risk.
On March 4, 1997, King pleaded guilty to 32 counts of mail fraud
relating to a Ponzi scheme and one count of bankruptcy fraud for concealing
his assets in a bankruptcy proceeding. The indictment alleged that,
between late 1986 and 1989, King solicited over $11 million from former
clients, many of whom were elderly, to invest their monies in secured
mortgages in return for guaranteed interest payments. Contrary to his
representations, King pooled the investor funds and loaned their money to
non-creditworthy borrowers on distressed properties. The indictment also
alleged that King kept his mortgage investment scheme afloat by using funds
provided by new investors to repay principal and to make interest payments
to existing investors. According to the indictment, King used the
remaining investor funds to support his lavish lifestyle and to pay for
gambling debts, family airline tickets, his daughter's wedding expenses,
and interior design bills for his residence in Boca Raton, Florida and his
summer house rental in the Hamptons, New York. In late 1989, as King's
scheme began to collapse, King sent lulling letters to investors falsely
reassuring them that their investments were safe.
On December 3, 1986, the Commission barred King from the securities
industry with a right, after three years, to reapply to become associated
with a broker or dealer in a non-supervisory, non-proprietary capacity.
The bar stemmed from King's 1984 conviction on state charges of insurance
fraud.
On September 28, 1990, the Commission filed an injunctive action
alleging that King violated various registration and antifraud provisions
of the Securities Act, Exchange Act and Advisers Act in connection with the
scheme set forth in the indictment. In December 1990, King was enjoined
from further violations of these provisions, ordered to comply with the
terms of the 1986 Commission bar order and ordered to make restitution to
investors. In addition, investor monies and assets were transferred to a
======END OF PAGE 1======
special agent appointed by the Court for purposes of liquidation and the
return of all available funds to investors. On March 8, 1991, the court
granted the Commission's further application for an Order permanently
prohibiting King from transferring or disposing of assets in excess of
ordinary and necessary living expenses and, upon application of the special
agent, ordered Wellesley Mortgage Corporation, an entity formerly
controlled by Barry King, to file for bankruptcy.
The Commission staff assisted the New England Bank Fraud Task Force of
the Department of Justice in its criminal investigation of King.
For further information, see Exchange Act Release Nos. 23862 and
33167, and Litigation Release Nos. 12670, 12738, 12808, 14574 and 15290.
======END OF PAGE 2======